Does it bring in revenue, or can it go? How to separate yourself from unprofitable business areas in four steps.

Some things in a company are like Aunt Erna’s unloved vase: it’s been there for years, nobody likes it, but no one dares to get rid of it. Many companies share similar sentiments about certain business areas, employees, or locations. They have long been unprofitable, slowing down progress, and yet people still hold on to them.

Companies cling to unprofitable business areas
because “it’s always been that way” or because “you don’t just do that”

But while you hesitate, you are burning cash every day. An unproductive employee costs resources. A loss-making location blocks potential. And a business area with no future drags the entire company down.

It’s time to make clear decisions. Now it’s time to clean up!

These four steps will help you let go of unprofitable business areas in a courageous, strategic, and economical way.

Step 1: Eliminate emotions. Bring in complex numbers.

“But we’ve invested so much!” Do you know this phrase? Then, congratulations: you’ve fallen into the classic loss aversion trap. Just because you, as an entrepreneur or manager, have invested money, time, or hope in something does not mean that it will eventually yield a profit.

Anything that has only generated costs for years has no place in your future strategy.
Anything that does not generate a return is excluded from the strategy and budget.

Think economically. Not sentimentally.

• A product that has been making losses for three years will not become a bestseller.
• A location that only looks good on the company logo remains a money pit.
• An employee who costs more than they contribute is not a pillar of support, but a risk.

To-do: Set criteria!

• Define a minimum yield per employee.
• Define minimum profits per location.
• Define minimum profitability per business area.

Step 2: Identify cost drivers (including hidden ones).

Significant losses should be noticeable in any company. But the small, creeping costs are often the most dangerous.

What or who is eating up my profits?

• The eternal “flagship location” is just a prestige project.
• The “valuable employee” who has been managing tasks that no one needs for years.
• The product line that “still has potential” but whose customers are now buying from competitors.

To-do: Perform a radical cost-benefit analysis!
Answer honestly. If the result is “probably hardly anyone,” then you know what to do.

• What would happen if we were to discontinue this business area tomorrow?
• Which employee would be missed if they quit today?
• Which customers would complain if we were to remove this product from our range?

Step 3: Eliminate the cost burden. But with a plan!

Anyone who thinks that a few layoffs or site closures will save a company’s figures is making a huge mistake. Haphazard cuts achieve nothing except chaos and demotivated teams.

Grow where there is potential. Not where there is stagnation.

To-do: Develop clear separation strategies.

• Winding down instead of rushing: An unprofitable business area can be sold, merged, or gradually phased out, rather than simply letting it die.
• Treat employees fairly: Not everyone who is laid off is a failure. However, companies must part ways with those who do not contribute to long-term success. Better with severance pay than with endless whining.
• Strategically reduce locations: It is not the smallest or most expensive location that needs to be eliminated, but rather the most inefficient one.

Step 4: Don’t be afraid of change and have the courage to leave gaps!

Many companies fail not because they make the wrong decisions, but because they don’t make any at all. They cling to the past instead of making room for the future.

Say goodbye to these thoughts:

• “We can’t close this division. What will the customers think?” Most of them have already decided to go to the competition anyway.
• “We have to give this employee another chance.” He’s had five already.
• “But what if we need it later?” Then do it again, with a better strategy.

To-do: Direct your resources toward the future!

• Invest in what is growing, not in what you have to keep alive artificially.
• Focus on efficiency instead of nostalgia.
• Recognize that letting go is often the best course of action.

Conclusion: Those who don’t let go of unprofitable business areas lose twice!

Bad businesses, inefficient employees, and dying locations are like a leaky boat: you can patch it up or finally change ships.

If you feel that it is time to make bold decisions but lack direction, as an experienced interim manager, I can support you in strategically shaping change. With a clear outside perspective, measurable criteria, and the necessary dose of pragmatism, I am passionate about helping companies focus, reduce unnecessary complexity, and align their resources with what is truly promising for the future.

Does it bring in revenue, or can it go?
You know the answer. Now you have to take action.

Finding new paths together
Think boldly. Dare to change.
Alexander d’Huc.